Last year, the retirement age for Malaysiaâ€™s civil servants has been raised to 58 years old. This is a personal choice for those who want to work for a few more years. For some people, it is not a choice but a must as some really need the income to live on. This situation is quite common as even retirees in the United States are facing the same dilemma.
A survey conducted by the Employee Benefit Research Institute in the USA shows that only a small percentage of workers (13%) have confidence of a comfortable retirement. Only 20% of retirees believe that they have sufficient money for retirement which is down from 41% in 2007.
The above situation stems from the fact that more and more people have to depend on their own savings for funding their retirement. In the United States, the average amount saved by people in their 60s is only USD100, 000 in 2007. Do not be surprise to hear that people in this age group still have debts to pay where the median debt is USD50, 000 and 45% of them still carry balances on their credit cards.
In Malaysia, according to the Employees Provident Fund (EPF), the average savings of members are low. The average savings at age 54 is RM114, 402 as reported by the EPF in 2006. Members are encouraged to increase their retirement savings in order to have at least RM120, 000 in their EPF fund when they reach 55 years of age. This is sufficient to generate RM500 a month and would last for 20 years until the person is 75 years old.
The following ideas are gleaned from moneycentral.com for those approaching their retirement. These are tips to get your finances in order and ensure a happy retirement.
1. Set a target retirement date
Having a target retirement date will enable you to plan how much money you need and how much money you have to fund it. Be flexible as you may end up having to work longer, part-time or otherwise in order to boost your retirement fund.
2. Determine where you are going to live
Where you live will have an impact on your expenses and how much money you need to cover for it. Are you going to live in a mortgage-free house, a small apartment, an expensive condo or holiday home? If necessary, you have the option of moving to a cheaper abode which also allows you to free up your home equity for other purposes.
3. Get the proper insurance coverage
Before you reach retirement, get enough health insurance coverage. As you get older, your health will deteriorate and your insurance will help to offset part of the medical or treatment cost.
4. Settle your debts
Ideally, you should not have any debts to deal with going into retirement. You may be relying mostly on your pension, savings or retirement funds which may not be sufficient to repay any outstanding debts or loans.
5. Come up with a retirement budget
Draw up your retirement budget and actually practice using it before you retire to get a good feel about it. Eventually, you can design a budget that is suitable for you upon retirement.
6. Time to review your estate plans or living will
As you get older, the risk of getting seriously ill or being incapacitated increases. Hence, it may be the right time to draw up a will if you do not have one yet or to review an existing will or estate plan. This is to ensure that your loved ones are properly taken care off. At the same time, you may also want to update your beneficiaries on your retirement, bank or savings accounts, investment accounts, life or health insurance policies, etc.